|School: Oil Crisis News from Around the World Quest 01: Oil Crisis News Task 01: Submit your articles here|
|updated 1/29/2003 2:45:00 PM by Earl M.|
|Report: BHP hit as Bass Strait oil shrinks|
|This story by By Rod Myer appeared in the Sydney Morning Herald on January 30 2003
BHP Billiton yesterday revealed that output from its Bass Strait oil deposits was declining more steeply than expected, causing market analysts to slash earnings estimates.
In its quarterly production report for December, BHP said oil production was down 16 per cent over the year, "mainly due to natural field decline in Bass Strait and Laminaria" on the North-West Shelf.
As petroleum accounts for some 34 per cent of BHP Billiton's earnings, the fall in output is considered significant. The dive in production is less than fortuitous for BHP given oil prices have been particularly strong in recent months, averaging $US33 a barrel in January.
However, the company said its profit projections had not changed.
UBS Warburg analyst Glyn Lawcock said he had been expecting a first-half profit for BHP of $US873 million ($1.48 billion) and had not changed that view. Nevertheless, he expected the market consensus figure of about $US925 million to come back closer to $US900 million. ABN Amro, which had tipped a first-half result around the market consensus, said it would be reducing that estimate as a result of the production report.
BHP said the market knew about the dive in oil output.
"We'd built a 17 per cent a year decline in Bass Strait output for the next six years into the petroleum
However, one analyst said he was surprised so much of that decline appeared to have been experienced in the first quarter. The total decline in petroleum production was 3.2 million barrels, with about one million barrels of that being caused by hurricane damage to the Typhoon field in the United States.
Full-year projections from analysts range from $US1.9 billion to $US2.05 billion.
But the Bass Strait decline was accentuated by the ending of an infill drilling program in the region.
Infill drilling is drilling small wells throughout an ageing oilfield that enable small, previously exploited deposits to be accessed.
The Bass Strait oilfield is now 30 years old and has been in decline since 1985. However, its life has already been extended beyond earlier expectations and further infill drilling is due to start later this year.
BHP said it expected oil production from new fields in the Gulf of Mexico and Algeria to make up for the decline in Bass Strait production from the middle years of the decade. However, there will be a hiatus for the next 18 months until these new fields begin to produce significantly.
Vicky Binns of Merrill Lynch said the outlook for BHP was improving, with stronger commodity prices across the board as well as stronger oil prices. "The consensus oil price estimate for 2003 is $US24 a barrel," she said.
This story was found at: http://www.smh.com.au/articles/2003/01/29/1043804408135.html
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